Cameron’s treatment of Warsi shows his blind spot

The PM is in danger of confirming the suspicion that the Tories are a rich men's club.

One feature of politics that is routinely forgotten in Westminster is that most people, most of the time are not paying attention and don’t really know what the government is up to. (The opposition are even more invisible.) Thus there is a tendency to think that the whole nation is abuzz with chatter about, for example, revealing text messages sent by Jeremy Hunt and the question of whether or not he should be referred by the Prime Minister to an independent advisor over his alleged breach of the ministerial code. It isn't.

This fiction is sustained by periodic opinion polls that ask questions such as “should Jeremy Hunt be referred to the independent advisor over his alleged breach of the ministerial code?” which is like asking “do you think a politician who is accused of doing something wrong actually did something wrong?” The answer will generally be “yes”. That doesn’t tell you much about anything other than the low esteem in which all politicians are held.

There are, however, exceptions. Sometimes issues cut through to the wider, non-specialist public. Sometimes also the persistent bakground hum of a scandal permeates the national consciousness, more as a nasty whiff of sleaze than a focused sense of outrage. It is in the latter category that the phone-hacking saga and the Leveson inquiry probably sit. Few will familiarise themselves with the exact chronology of emails, regulatory decisions and quasi-judicial whatnot. Many will detect something unseemly in the relationship between ministers and the news organisation that, somewhere down the chain of command, hacked the voicemail of a murdered teenager.

There is, however, another category of political cut-through, which is the stories that resonate with particular segments of the population. It is into this bracket that, I suspect, falls the treatment of Sayeeda Warsi, the Tory co-chair accused of a range of improprieties connected to registration of business interests.

Baroness Warsi has been referred to the advisor on ministerial standards and is under pressure to stand down from her party role – which brings with it a cabinet seat – while the investigation is under way. The contrast with the treatment of Hunt, who has been spared such indignity, is conspicuous. The reason for the different treatment is fairly straightforward. If Hunt is deemed to have failed in his duty to be impartial in adjudicating News International’s bid for a 100 per cent stake in BSkyB, questions naturally arise about David Cameron’s judgement in appointing him to that function and defending him for so long. By contrast, Warsi can be sacrificed without much danger of stray bullets hitting Downing Street.

Besides, Hunt is popular among MPs and a useful, loyal minister. Warsi is the subject of a long, hostile campaign by Tory backbenchers who want a chairman who sits in the House of Commons and will be a more effective channel for backbench opinion to the PM. MPs want, in other words, a chairman who looks and sounds a bit more like them. And there’s the problem. Warsi is a Muslim woman from the north of England. There are not many on the Conservative benches. Naturally, the anti-Warsi camp is very sensitive to the charge that it is motivated by racism, sexism or any other prejudice. It is all just a question of political effectiveness, they insist. That is plainly a bit disingenuous. There are plenty of white Tory men who would love a seat in the cabinet and flatter themselves by thinking they have been passed over because of a positive discrimination policy in favour of ethnic and gender diversity.

The crucial point, however, is that the different treatment of Hunt and Warsi will be noticed much more among those voters for whom the promotion of an Asian-British woman to the cabinet is a big deal. It won’t cut through in much of the country, but it will be amplified in precisely those communities where lurks suspicion of the Tories as exclusive and insensitive to racism. This has been identified by Downing Street pollsters as a key strategic weakness for the party and an obstacle in Cameron’s ambitions to win a parliamentary majority.

Particular faith or immigrant communities are acutely aware of who from their number has “made it” in Britain. This is a perception that cuts across party lines and penetrates well beyond the usual level of apathy and lack of attention to the Westminster circus. In parallel with this awareness runs hyper-awareness of anything that resembles unchecked prejudice. Consider, for example, the trouble that Ken Livingstone got into when he appeared repeatedly insensitive to concerns raised about comments he made to and about London’s Jewish community. People who might not otherwise have closely followed the London mayoral race knew that there was a problem with Ken and anti-Semitism, even if they couldn’t precisely pin point what it was.

This is the danger that Cameron runs with Warsi. It is a blind spot for him since he no doubt has absolute confidence in his own credentials as a man of great fairness, wholly lacking in racism. It doesn’t matter. What matters is that there are people who don’t share his confidence and for whom it is symbolically important that a member of their community – or even just someone with the same colour skin as them – has reached the highest echelons of power. It matters that they then glance across at events in Westminster, hear a bit about some scandal and, without taking in all the details, clock that the posh white guy gets let off the hook while the Asian lady gets hung out to dry. That is hardly going to reassure them that the Tories are no longer a rich men's club.

William Hague, David Cameron and Nick Clegg attend a Diamond Jubilee Reception at Guildhall in London. Photograph: Getty Images.

Rafael Behr is political columnist at the Guardian and former political editor of the New Statesman

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Q&A: What are tax credits and how do they work?

All you need to know about the government's plan to cut tax credits.

What are tax credits?

Tax credits are payments made regularly by the state into bank accounts to support families with children, or those who are in low-paid jobs. There are two types of tax credit: the working tax credit and the child tax credit.

What are they for?

To redistribute income to those less able to get by, or to provide for their children, on what they earn.

Are they similar to tax relief?

No. They don’t have much to do with tax. They’re more of a welfare thing. You don’t need to be a taxpayer to receive tax credits. It’s just that, unlike other benefits, they are based on the tax year and paid via the tax office.

Who is eligible?

Anyone aged over 16 (for child tax credits) and over 25 (for working tax credits) who normally lives in the UK can apply for them, depending on their income, the hours they work, whether they have a disability, and whether they pay for childcare.

What are their circumstances?

The more you earn, the less you are likely to receive. Single claimants must work at least 16 hours a week. Let’s take a full-time worker: if you work at least 30 hours a week, you are generally eligible for working tax credits if you earn less than £13,253 a year (if you’re single and don’t have children), or less than £18,023 (jointly as part of a couple without children but working at least 30 hours a week).

And for families?

A family with children and an income below about £32,200 can claim child tax credit. It used to be that the more children you have, the more you are eligible to receive – but George Osborne in his most recent Budget has limited child tax credit to two children.

How much money do you receive?

Again, this depends on your circumstances. The basic payment for a single claimant, or a joint claim by a couple, of working tax credits is £1,940 for the tax year. You can then receive extra, depending on your circumstances. For example, single parents can receive up to an additional £2,010, on top of the basic £1,940 payment; people who work more than 30 hours a week can receive up to an extra £810; and disabled workers up to £2,970. The average award of tax credit is £6,340 per year. Child tax credit claimants get £545 per year as a flat payment, plus £2,780 per child.

How many people claim tax credits?

About 4.5m people – the vast majority of these people (around 4m) have children.

How much does it cost the taxpayer?

The estimation is that they will cost the government £30bn in April 2015/16. That’s around 14 per cent of the £220bn welfare budget, which the Tories have pledged to cut by £12bn.

Who introduced this system?

New Labour. Gordon Brown, when he was Chancellor, developed tax credits in his first term. The system as we know it was established in April 2003.

Why did they do this?

To lift working people out of poverty, and to remove the disincentives to work believed to have been inculcated by welfare. The tax credit system made it more attractive for people depending on benefits to work, and gave those in low-paid jobs a helping hand.

Did it work?

Yes. Tax credits’ biggest achievement was lifting a record number of children out of poverty since the war. The proportion of children living below the poverty line fell from 35 per cent in 1998/9 to 19 per cent in 2012/13.

So what’s the problem?

Well, it’s a bit of a weird system in that it lets companies pay wages that are too low to live on without the state supplementing them. Many also criticise tax credits for allowing the minimum wage – also brought in by New Labour – to stagnate (ie. not keep up with the rate of inflation). David Cameron has called the system of taxing low earners and then handing them some money back via tax credits a “ridiculous merry-go-round”.

Then it’s a good thing to scrap them?

It would be fine if all those low earners and families struggling to get by would be given support in place of tax credits – a living wage, for example.

And that’s why the Tories are introducing a living wage...

That’s what they call it. But it’s not. The Chancellor announced in his most recent Budget a new minimum wage of £7.20 an hour for over-25s, rising to £9 by 2020. He called this the “national living wage” – it’s not, because the current living wage (which is calculated by the Living Wage Foundation, and currently non-compulsory) is already £9.15 in London and £7.85 in the rest of the country.

Will people be better off?

No. Quite the reverse. The IFS has said this slightly higher national minimum wage will not compensate working families who will be subjected to tax credit cuts; it is arithmetically impossible. The IFS director, Paul Johnson, commented: “Unequivocally, tax credit recipients in work will be made worse off by the measures in the Budget on average.” It has been calculated that 3.2m low-paid workers will have their pay packets cut by an average of £1,350 a year.

Could the government change its policy to avoid this?

The Prime Minister and his frontbenchers have been pretty stubborn about pushing on with the plan. In spite of criticism from all angles – the IFS, campaigners, Labour, The Sun – Cameron has ruled out a review of the policy in the Autumn Statement, which is on 25 November. But there is an alternative. The chair of parliament’s Work & Pensions Select Committee and Labour MP Frank Field has proposed what he calls a “cost neutral” tweak to the tax credit cuts.

How would this alternative work?

Currently, if your income is less than £6,420, you will receive the maximum amount of tax credits. That threshold is called the gross income threshold. Field wants to introduce a second gross income threshold of £13,100 (what you earn if you work 35 hours a week on minimum wage). Those earning a salary between those two thresholds would have their tax credits reduced at a slower rate on whatever they earn above £6,420 up to £13,100. The percentage of what you earn above the basic threshold that is deducted from your tax credits is called the taper rate, and it is currently at 41 per cent. In contrast to this plan, the Tories want to halve the income threshold to £3,850 a year and increase the taper rate to 48 per cent once you hit that threshold, which basically means you lose more tax credits, faster, the more you earn.

When will the tax credit cuts come in?

They will be imposed from April next year, barring a u-turn.

Anoosh Chakelian is deputy web editor at the New Statesman.